M.L.Simon: Part 1: Lack of property rights holds back world

The first part of this series on DeSoto discusses property.

I have been studying one of the most fascinating practical economists of our time—Hernando De Soto of Peru. What makes him so interesting is his belief that it is lack of property rights that is holding back the developing world.

Property. What is property? Proudhon said property is theft. My contention is that taxation is theft; but I will leave that question for another day. Today, I want to talk about property. What is it? Who has it? Why we want it. How it increases wealth. How when we legalize it, violence decreases. And possibly a few other things as well. Oh yeah, and why lack of attention to property rights contributed to America’s loss in Vietnam. Plus how economies are really built from the bottom up. And why Grameen Banks are a very good idea and the World Bank is not.

Let us start with property in its very smallest sense. If you give a 2-year-old something and tell him that it is his, the 2- year-old automatically gets it and will defend his property unless some deal is made. Two year olds get property. They have to be taught to share, but ownership they get. It looks like property is built into the brain. We know property is attractive to women because ugly old millionaires have no trouble getting women. So property is important. Why? It helps ensure reproductive success. What is reproductive success? Grandchildren. Stored wealth—property—helps insure grandchildren.

So we know why people like property—reproductive efficiency.

Let us look at some of the ways property is dealt with in the world. In some places, only the government can own property. These places do not work too well. In other places, a clan is responsible for property with some individual property rights. These places work a little better. In other places, people have squatter’s rights to property not recognized by government; these places do better yet. The best places of all are where the individual has tradeable rights in his property recognized by the government.

How did all this develop, and why is it good? A good place to start is Egypt many thousands of years ago. The important thing about Egypt is the predictability of the Nile floods. Under those conditions, fixed-site agriculture can be really profitable if you can keep out marauders and settle land disputes without violence.

To settle land disputes without violence, you need surveying. Once you have surveying, parcels of land can be traded. Once you can trade property, you are no longer bound by your tribe. You are, however, bound to those who guarantee your property: the nation. So with tradable property, loyalties can expand. Of course, in exchange for property guarantees and the tradeability of property, you get taxes to fund the government that is providing protection. You get to pay for civil servants who record and enforce property boundaries and the army that keeps out marauding invaders. Very expensive, but cheaper than property fights and marauding invaders. Everyone profits.

Now to maintain titles, you need land records, which means a recorder of deeds and boundary markers, plus angle and length measurement instruments as a check on the boundary markers. So advanced math is developed. Geometry came of necessity. No geometry, no land title.

So that is how you handle a formal system of property. In many places where there is no transferable title that is recognized nationwide, people are, in effect, slaves to a traditional plot of land. That is, there may be title, but it is not negotiable because it is informal.

M. Simon is an industrial controls engineer for Space-Time Productions and a Free Market Green(c) M. Simon – All rights reserved. Permission granted for one time use in a single periodical. Concurrent publication on the periodical’s Web site is also granted.

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